A person's retirement is important to determine whether that person is eligible to commence a retirement phase income stream. The income and capital gains earned on the capital supporting a retirement phase income stream is exempt from income tax.
The retirement of a person is taken to occur:
Preservation age to less than 60
In the case of a person who has reached a preservation age that is less than 60 - if:
(i) an arrangement under which the member was gainfully employed has come to an end; and
(ii) the trustee is reasonably satisfied that the person intends never to again become gainfully employed, either on a full-time or a part-time basis.
"gainfully employed" means employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment. It does not include a person who only receives passive income such as trust distributions or dividend income. In addition, unpaid or charity work does not meet the definition of gainfully employed.
"full-time", in relation to being gainfully employed, means gainfully employed for at least 30 hours each week.
"part-time", in relation to being gainfully employed, means gainfully employed for at least 10 hours, and less than 30 hours, each week.
Age 60 to less than 65
In the case of a person who has attained the age of 60 - an arrangement under which the member was gainfully employed has come to an end, and either of the following circumstances apply:
(i) the person attained that age on or before the ending of the employment; or
(ii) the trustee is reasonably satisfied that the person intends never to again become gainfully employed, either on a full-time or a part-time basis.
For example, a person who has 2 employment arrangement ceases one employment arrangement after attaining the age of 60 will meet the retirement definition.
Age 65 and over
A person attaining age of 65 will meet a Nil cashing restrictions condition of release. This means a person who has attained the age of 65 may continue to be gainfully employed either on a full-time or a part-time basis and still be eligible to commence a retirement phase income stream.
Change in situation
If you have reached your preservation age and declared retirement, and your situation has since changed, you can return to work. Your retirement phase income stream continues. However, you must be able to demonstrate that your intention at the time of making the retirement declaration was genuine, and the ATO may ask you for evidence.
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